The Reserve Bank of India (RBI) has kept the repo rate unchanged at 5.25 per cent after the Monetary Policy Committee's three-day meeting, maintaining its neutral policy stance amid global uncertainties, including the ongoing Iran conflict and volatile crude oil prices.
RBI keeps policy rates unchanged
The decision to hold the repo rate at 5.25 per cent was taken unanimously by the Monetary Policy Committee (MPC). Alongside the repo rate, the RBI also retained the Standing Deposit Facility (SDF) rate at 5 per cent. The Marginal Standing Facility (MSF) rate and the bank rate were left unchanged at 5.5 per cent.
Announcing the policy, RBI Governor Sanjay Malhotra said the Central bank would continue with its neutral stance while closely monitoring inflation and growth trends before considering any policy action.
Growth outlook revised upward
The RBI has lowered its FY27 retail inflation projection from 5.1 per cent to 5 per cent. At the same time, it raised the real GDP growth forecast for FY27 from 6.6 per cent to 6.7 per cent.
Speaking about the economy, Malhotra said, "Growth, although resilient, is expected to be lower in this financial year. The outlook, however, is hazy because of the uncertainties regarding South's global trade policy. There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action."
On inflation, he said, "Realised inflation in the first quarter remained marginally lower than projections, reflecting the limited pass-through of cost pressures... Headline inflation is projected to increase, primarily due to supply-side pressures from food and fuel, while core inflation remains moderate and is expected to decline after peaking in Q3... Excluding precious metals, underlying inflation continues to remain benign and is in line with earlier projections."
Iran conflict, monsoon remain key risks
The RBI Governor said geopolitical developments continue to cloud the economic outlook.
"The re-escalation of the (Iran) conflict since the first week of July has amplified volatility in energy prices. Early results of corporates for Q1 indicate healthy performance in the manufacturing sector... Private consumption continued to be driven by buoyant discretionary spending. Overall, the Indian economy performed better than expected in Q1."
He also flagged weather-related concerns, saying, "The impact of El Nino on the temporal and spatial distribution of rainfall remains a major risk. Global oil prices have also remained highly volatile, with sharp two-way movements triggered by geopolitical developments, blurring the near-term inflation outlook... While generalised inflation pressures remain modest so far, the risk of second-round effects from higher food, fuel and other input costs translating into broader-based inflation persists."